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Summary:

Renting movies is big business. Long the domain of the brick-and-mortar video store, it was revolutionized almost 10 years ago with the introduction of Netflix (NFLX). But while Netflix remains locked in its ongoing turf war with Blockbuster (BBI), newcomer Vudu has arrived on the scene […]

Vudu
Renting movies is big business. Long the domain of the brick-and-mortar video store, it was revolutionized almost 10 years ago with the introduction of Netflix (NFLX). But while Netflix remains locked in its ongoing turf war with Blockbuster (BBI), newcomer Vudu has arrived on the scene with the hope of revolutionizing the movie rental industry all over again. The odds, however, are against it. Even Apple (AAPL) has found little success with its Apple TV product so far.

Downloading movies is currently one of the most hyped technology trends out there. Everyone from Microsoft (MSFT) to Sony (SNE) wants a piece of the download action — even though there is little evidence that anyone is actually making money. Still, one only has to look at the download trends on peer-to-peer networks to see how committed consumers are to downloading movies. According to a study conducted earlier this year by market research firm Advanis, 79 percent of the total number of downloaded movies are done so on illegal peer-to-peer networks. Advanis also reported that illegal downloads cost the movie industry $598 million per year.

Vudu is trying something new: allowing consumers to download movies to their Vudu set-top box in the living room. In an ideal scenario, this might actually work.

When compared to Slingbox and TiVo (TIVO), the Vudu box is a simple idea that even the most novice movie renter can use with very little effort: Set up the box, pick one of the 5,000 movies available for rent, agree to pay the rental fee of $2 to $4 and for the next twenty-four hours, you can watch it as many times as you’d like.

Of course, cable companies could do the same thing as Vudu. But as we all know, cable providers offer tortured consumer experiences. And while cable companies currently provide a similar service with their on-demand offerings, the Vudu box can offer a much wider array of titles that are more likely to appeal to the average consumer. In fact, if just one percent of the 30 million people traveling to a rental store each month decide to adopt Vudu as their only rental option, this device can have a major impact.

That, however, is an ideal situation, and we don’t live in an ideal world. As David Pogue explained in his recent New York Times column, the Vudu box contains some movies you’d be interested in seeing, but “plenty of the movies are pure filler.”

To make matters worse, Pogue explained that the Vudu box is a victim of Hollywood’s arcane movie release order. Oddly, Vudu gets movies while they’re available on DVD and pay-per-view, but they then drop off the list until they’re shown on TV — sometimes a year later. To further illustrate the immense power Hollywood wields over Vudu, Pogue points out that some movies are available for purchase and rent, while others can only be bought. Even worse, “the list includes hundreds of movies from some studios (Paramount, Sony, Warner) and only a handful from others (Disney).”

As Apple is keenly aware, Hollywood still dictates the success and failure of products. With such extensive Hollywood oversight, Vudu may be unable to provide users with the movies they want. After all, regardless of the quantity of movies, users are still looking for movies worth watching. And if the average consumer can’t find a movie to watch in a list of 5,000, the end result will be swift — failure.

Don Reisinger is a freelance technology journalist who covers everything from Google to HDTVs. He currently writes for over 15 popular technology publications, including CNET’s Digital Home, InformationWeek and PC World.

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  1. Price is the sticking point. I get a similar value from Netflix in terms of renting movies, so what is the premium that Vudu is offering? It’s not choice: Netflix offers close to 100,000 titles, not just 5,000. Is it being able to make up your mind about the movie you see at the last minute? Avoiding that exhausting walk to the mailbox? Fine, but that’s not worth $400 to me.

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  2. I know of one P2P CDN that is developing a HTTP based distribution service that will play on any device that can render a web page so a STB like VUDU is way overpriced for the experience it provides .

    Laptops with S-video out will provide a similar experience and you can play video from a Multitude of sources including Bittorrent downloads with no restrictions .

    Give me ad supported streaming content that I can play anywhere and this box might be worth buying .

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  3. Matt Brown-Reugg Monday, September 17, 2007

    Can you down load in 1080i or P ? If so how long does it take?

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  4. I am also a Netflix subscriber and until a company provides such a vast library at the same or lower cost, then I won’t be switching.

    I watch around 6 movies per week and it would be great to simply download them instead of mailing and waiting, I would watch even more.

    Maybe Netflix can buy one of these start-ups and provide a much larger library.

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  5. David…

    I watch around 6 movies per week and it would be great to simply download them instead of mailing and waiting, I would watch even more.

    If you have a PC, you can. (I’m a Mac person, so I don’t have the option.) Netflix has a new service that allows you to download movies to your computer, at no additional charge. Perhaps a Netflix deal with Apple to allow Netflix downloads on AppleTV would vastly increase the value of both products.

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  6. I hope their objective is an IP sale to someone like Motorola, Scientific Atlanta, or maybe a cable MSO.

    As a stand alone business relying on $400 box sales to enable a rental/purchase revenue stream, they have absolutely no chance.

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  7. I agree with you, price is the key issue for the growth of Internet VOD market,

    My opinion is that

    downloading movies is a good solution for VOD ou NVOD.
    using P2P networks is a very clever way to reduce the cost of downloading for the VOD platforms, and consequently to reduce the price paid by the consumer: I firmly believe that a large part of consumers could accept to wait a few hours for P2P downloading if they have lower prices in return. They will just have to choose their movies on a web site and then to launch the P2P downloading of the few movies they have chosen for the coming 2-3 days…
    if you imagine a smart technology to allow recommendation/redistribution by allowing consumers to pass the movies they like to friends but with those copies having a teasing part and a scrambled part, unscrambling of the movie being under the control of the right owners with tools to set up innovative business models, from free sponsored content to paying content, then you could have the beginning of a solution to really boost the VOD business on the Internet.

    See what I mean ?

    Just go to http://exemple.pumit.com to have an example.

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  8. My buddy has this in beta and it’s got a great interface, it’s slick and fast. Click and the movie is running. I thought Netflix was the best until I saw and used this. All of the media guys who have actually used it seem to agree (NYT, Forbes, PCMag, etc).
    They are high def capable and look far better than Apple and the DVDs and the cable companies.
    But the real difference is in content. They got all 8 major movie studios to give them content, versus only two for Apple. Apple may be cheaper, but you don’t have the content. I gather from some articles two weeks ago that the movie companies were actually backing away from Apple because downloads from iTunes are hackable and the movie guys aren’t going to let that happen and they now have the muscle to deny movies unless the company locks it up somehow. VUDU has done that.and that may be why its going to cost us somewhat more.
    In the real world, most people will give up the limited download selection on Apple, Comcast, Blockbuster, etc. and pay the bucks to get the movie of their choice, without having to watch it or stream it over 40 minutes to or from your computer. Click, and it’s playing on your TV.
    I would never know how to hack it and people who want to steal it one way or another will do it. But as a simple consumer who loves movies, this is a giant step above what we’ve been used to.
    len nam

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  9. [...] that. Even though it is backed by white shoe VC firms such as Benchmark, the company is part of an extremely competitive landscape and will need a good skipper to navigate the choppy [...]

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  10. [...] it’s quite apparent TiVo is feeling the heat from Vudu. By allowing users to download movies at any time and start watching them even before the download [...]

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